panama city.jpg
Photograph: EPA/ALEJANDRO BOLIVAR

Panama will comply with international standards for automatic tax information sharing, a top official from the country's Economy Ministry said Thursday in Washington.

The announcement follows revelations this month of a data leak from Panama-based law firm Mossack Fonseca detailing how money was funnelled to shell companies in tax havens.

"We have reiterated our full commitment to cooperating with the international community during investigations and to continue to implement significant reforms to strengthen the transparency of our financial and legal framework," said Ivan Zarak, Panamanian vice minister for economy, on the sidelines of spring meetings of the World Bank and International Monetary Fund.

Organization for Economic Co-operation and Development (OECD) Secretary-General Angel Gurria hailed the Panamanian statement as "very good news indeed." Panamanian action would be "the silver lining" of the massive data leak, he said.

Gurria said it appeared Panama would comply with tax data-sharing standards due to take effect next year among some 90 participating countries.

Iceland's prime minister resigned after his foreign accounts were exposed in the so-called Panama Papers, and many other government officials, athletes and celebrities around the world were named, though whether their transactions were illegal was not clear.

"Panama will not tolerate illegal activities of any form," Zarak said. "We are aggressively pursing any allegations according to the rule of law."

Panamanian authorities conducted a lengthy search this week of Mossack Fonseca offices, and seized computer servers.

Finance ministers and central bankers from the Group of 20 major advanced and emerging economies meeting in Washington were to discuss an initiative Friday from the European Union's five largest economies, who are pushing for prompt action to increase transparency about foreign tax havens.

The so-called G5 group of Germany, Britain, France, Italy and Spain agreed Thursday to quickly launch a pilot project for sharing information about companies founded in tax havens.

The five EU countries formally presented their joint plan to China, which holds the 2016 presidency of the G20. The document, which was viewed by dpa, said that a "clear commitment" by Panama and other countries outside the system was "vital."

Citing "recent events," the G5 plan called for increased transparency about the owners who benefit from shell companies and similar entities.

"Criminals continue to find ways to exploit the cracks in the current system, setting up complex structures in various and often multiple locations to hide their activities, be it money laundering, tax evasion or illicit finance," the five European countries said in their letter to China.

Another international coalition, the Group of 24, wants to "put an end to tax havens," said Colombian Finance Minister Mauricio Cardenas, who chairs the group, which lobbies the IMF and World Bank on behalf of developing countries from Asia, Africa and Latin America.

In a statement, the G24 said that "effective international tax cooperation is an essential complement to our efforts to mobilize domestic resources."

The group "strongly" supported participation by developing countries "on an equal footing" in international efforts to protect national governments' tax bases and combat profit-shifting by companies.

IMF chief Christine Lagarde said that improved cooperation and exchange of information between governments was "unfinished business" that will require all 189 member countries in the IMF-World Bank system.

Earlier Thursday in Strasbourg, France, European Parliament leaders agreed to set up an inquiry committee the Panama Papers.

EU lawmaker Guy Verhofstadt, who leads the Liberal faction in the European Parliament, said the committee probe would be a "key step to unveil the truth" and eventually forge legislation to deter and prosecution financial malfeasance.

"It still is too easy for many companies and individuals to avoid taxes abroad," he said. "This has to stop."

The Panama Papers scandal showed that authorities have "just been scratching at the surface of the odious tax avoidance practices employed by individuals and businesses around the world and Europe," said Philippe Lamberts, leader of the Green faction.

A vote to officially form the one-year inquiry committee is expected in May.

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